RI-379
February 22, 2019
SYLLABUS
An attorney who serves as an arbitrator or mediator may deposit prepayments or retainers for such services into an IOLTA account.
References: MRPC 1.15(a)(3), 1.15(d), 1.15(j), and 2.4.
TEXT
The Committee has been asked whether it is ethically permissible for an attorney serving as an arbitrator or mediator receiving prepayment for ADR services to deposit the unearned portion of the payment for ADR services into an IOLTA account or non-IOLTA account.
MRPC 1.15(a)(3) says, in part:
An IOLTA account shall include only client or third person funds that cannot earn income for the client or third person in excess of the costs incurred to secure such income while the funds are held.
MRPC 1.15(d) says:
A lawyer shall hold property of clients or third persons in connection with a representation separate from the lawyer's own property. All client or third person funds shall be deposited in an IOLTA or non-IOLTA account. Other property shall be identified as such and appropriately safeguarded.
MRPC 1.15(j) states:
A lawyer’s good faith decision regarding the deposit or holding of such funds in an IOLTA account is not reviewable by a disciplinary body. A lawyer shall review the IOLTA account at reasonable intervals to determine whether changed circumstances require the funds to be deposited prospectively in a non-IOLTA account.
Retainers or advance payments to a mediator or arbitrator are not client funds since the retaining persons or attorneys are not clients of the mediator or arbitrator. 1 They, however, certainly are funds of third persons. The Rule definition says the funds " . . . cannot earn income for the . . . third persons in excess of the costs incurred to secure such income while such funds are held." Neither the persons nor attorneys who pay a retainer in this context expect to earn interest during the time the funds are held. Since the mediator or arbitrator does not expect to earn such interest, the IOLTA account is an appropriate place to deposit such funds. While there is no legal impediment to depositing such funds in a non-IOLTA account, the agreement between the arbitrator/mediator and the persons/attorneys would need to specify who receives the interest earned while the funds are on deposit. Deposit into an IOLTA account is the more sensible course of action, given the short time such funds are likely to be held.
The protection afforded a mediator or arbitrator under MRPC 1.15(j) who in good faith deposits retainers in an IOLTA account further supports this conclusion.
CONCLUSION
An attorney who serves as an arbitrator or mediator may deposit prepayments or retainers for such services into an IOLTA account.
1. MRPC 2.4. For that reason, MRPC 1.15(d) does not apply to this fact situation.